Loading data...

x

Loading data...

The 11th floor executive dining arena at the ICICI Bank Towers in Mumbai’s financial district had an unwritten rule on who sits where on the table. That was mostly driven by hierarchy. That has changed since Sandeep Bakhshi occupied the corner office in October 2018.

And that’s just the beginning.
Succeeding someone as a chief executive when the scenario is normal is an ideal position to be in, but Bakhshi does not have that luxury. Even for troubled institutions, the challenge mostly would be either financial or a tarnished public image. For Bakhshi, after a tumultuous 2018 for the bank, it is both.

As Bakhshi sets out to reinvent the institution that has played a role for over six decades in different avatars, the job on hand is to remove the cobwebs that have grown over the years, project an image that’s compliant and friendly, and also lay out a path that would be less bumpy in the future.

Along the way, there would be compromises and confusion though.

Sandeep Bakhshi did not not comment on the story.

It is “profitability over top line,” says Sandeep Batra, presidentcorporate centre at ICICI Bank, who moved along with Bakhshi to the parent company from the life insurance venture. “We won’t do things that we don’t understand. We have become very particular about where we would be lending.”

The intentions are right and the strategy is clear. But the more difficult part is to junk past priorities and direct staff to think and act differently.

“Now, they will be averse to sectors where they have burnt their fingers,” says Sidharth Purohit, analyst at SMC Global Securities.

BYE BYE PROJECT FUNDINGShedding the past is more important for a struggling institution than executing new ideas because the weight of the past if allowed to fester could leave any new initiative ineffective.

In what could well be the most significant statement of his stewardship, Bakhshi has said no to project funding — the seed which was sown in 1994 as Industrial Credit and Investment Corporation of India that evolved into ICICI Bank.

“We are not going to project finance,” says Batra. “That’s very clear. We are willing to lend wherever people are putting in equity.”

The aversion to project funding is understandable. The banks’ stressed assets — bad loans plus the restructured loans — is at 8.54% of total loans. The chunk of bad loans is because of lending to power projects and other infrastructurerelated ones.

While that may be the way to go in an era when individual consumers have become more dependable than billionaire corporates with stretched balance sheets and poor equity positions, every burnt lender is going the same way.

But that means compromise on size. The days of heady assets growth may well be behind it.

“How to manage profitability when the corporate portfolio is not growing will be a question,” says Ashish Gupta of Credit Suisse, an investment bank.

Under Chanda Kochhar, who quit last year amid a probe into her corporate governance practices, the bank’s assets grew 1.5 times to Rs 8.74 lakh crore in September 2018, from Rs 3.79 lakh crore in March 2009, the year when she was elevated to succeed KV Kamath as the CEO.

NO MORE ADVENTURESEnterprises evolve to survive and thrive, else they perish. The Global Financial Crisis showed how giant financial services firms such as Citigroup, Morgan Stanley and JPMorgan reoriented themselves to grow.

In the local market, ICICI Bank is a standing example of how reinvention helped it survive the onslaught of market economy in the 90s, when its peers of yesteryears such as IFCI and IDBI Bank struggle to stay afloat.

Under the universal bank model spearheaded by Kamath, it grew substantially in retail while still doing project funding. When the dependence on wholesale funding got the bank into trouble, his successor Kochhar fixed it by growing retail deposits aided by executive director Rajiv Sabharwal.

When even the state-run banks are struggling for low-cost deposits, ICICI Bank has nearly half of its deposits in the low-cost current and savings accounts. Just like Kamath’s record Rs 25,000-crore equity helped it tide over the stress, the retail buffer built by Kochhar could well be the springboard for the next take off.

“When you have good CASA, why would you get adventurous,” says Anup Bagchi, executive director, ICICI Bank. “I don’t have to be adventurous.”

With the buffer of low-cost funds, it is looking to expand the retail footprint enabled by costeffective technology and into small and medium enterprises, which have now become bankable because of the Goods and Services Tax.

Retail, which comprises 57.3% of its overall loans, may grow further in the next few years. SME which is at 4.6%, will also see a fresh boost with the its centres sanctioning loans nearly doubling to 70.

“Risk-adjusted profitability will go up,” says Gupta of Credit Suisse. “Some of the mistakes of last time will not be repeated.”

Algorithms would get bigger than humans at ICICI retail, as it pushes the ‘insta’ of everything. It will eliminate paper and human intervention to the last level.

“The direction on everything is insta,” says Bagchi. “Cost of acquisition is zero. No one questions decisions. Conserve branch staff for advisory,” he says, adding that despite turning to technology, it would net hire 3,500 staff this fiscal.

FREEDOM WITH CAUTIONDespite the well-meaning directional changes, projects could falter if things on the ground do not change. It could hold true for ICICI Bank as well. So, how is the execution planned. Decongest.

Cutting the clutter in the process is the priority for Bakhshi.

“There is a lot of delegation that’s going on at the front end,” says Batra. “As an insider, if a job took two days, now it happens in less than half a day. Processes that have accumulated over the years are getting weeded out.”

Earlier, the key functions of cost control and manpower allocations were determined at the head office, but that has since been given to local offices and branches with specific targets. This would enable more freedom to managers at midlevel and generate more involvement and responsibility.

“Bakhshi has been working towards easing internal processes and removing bottlenecks to enable faster turnaround time for customers,” said Rohan Mandora of Equirus, a stock broking firm.

A shift to prudence always leads to lower growth rate and investor anxiety, but ultimately leads to sustained growth as seen with the likes of Morgan Stanley under James Gorman since the credit crisis.

“The most important thing we are focused on is the culture of our management team to never put our shareholders or society in the kind of jeopardy like in 2008,” Gorman told ET in an interview last year. “Our management team is very stable. We are determined to behave prudently, not to make reckless decisions and put our employees, shareholders or clients in any financial danger.”

Bakhshi has started on a similar note. If he pulls it off, he may well turn out to be India’s Gorman.